Canada housing starts up but condo strength to unwind

Tue Mar 8, 2011 11:01am EST
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By Ka Yan Ng

TORONTO (Reuters) - Canadian housing starts rose a better than expected 6.6 percent in February from January, thanks to a jump in condominium construction, though analysts warned the strength is unlikely to carry into coming months and could be a mild drag on overall economic growth.

Housing starts climbed to a seasonally adjusted annualized rate of 181,900 units in February from a revised 170,600 units in January, Canada Mortgage and Housing Corp said on Tuesday. January starts were revised up slightly from 170,400.

Analysts, on average, had forecast 173,000 starts in February.

"The details reflected somewhat of a lack of breadth, so we discount the strength on volatility concerns and are not convinced this is a sustainable break from a lower trend," wrote Scotia Capital economists Derek Holt and Gorica Djeric.

Urban starts rose by 9.4 percent to 161,000 units, CMHC said, driven by a 14.5 percent rise in construction of multiple-unit buildings, mainly condominiums, accounting for 94,900 units.

Analysts said strength in the condo market may not continue as there has been a recent drop in building permits issued for the sector. CABPER=ECI

The closely watched single-family homes segment edged 3.0 percent higher to 66,100 units in February.

Despite the month-to-month swings in the volatile multi-unit group, the underlying trend suggests housing starts are averaging 176,000 units a month.   Continued...